There’s blood in the water and the sharks are starting to circle.
To clarify the analogy somewhat, the blood is $750 million in tobacco settlement money and the sharks would be 144 state legislators and the guy masquerading as Louisiana’s governor.
Bobby Jindal, the same guy who as Secretary of the Louisiana Department of Health and Hospitals (DHH) in 1996, opposed the state’s participation in the 46-state litigation against the nation’s four largest tobacco companies, now wants to sell off the remaining portion of the 1998 settlement of that suit to generate $750 million for the state treasury.
That’s the same Bobby Jindal who as DHH secretary, was well aware that the state was spending millions of dollars per year in treatment of indigent patients for tobacco-related illnesses at the state’s charity hospitals, but nevertheless signed affidavits along with his boss, then-Gov. Mike Foster, that argued that Attorney General Richard Ieyoub did not have the authority to sue on behalf of the state and DHH.
That’s also the same Bobby Jindal who as governor in absentia, successfully opposed the lawsuit by the Southeast Louisiana Flood Protection Authority-East (SLFPA-E) against 97 oil and gas companies in an effort to hold them accountable for damages to Louisiana’s coastal wetlands, claiming that SLFPA-E did not have authority to file suit on behalf of the state.
No matter. The tobacco litigation was settled for $365.5 billion in 1998 and the state was in line to receive $4.6 billion, or $141.2 million per year for 25 years and continued payments as long as tobacco products are sold within the state as its share of the settlement. http://kff.org/other/state-indicator/tobacco-settlement-payments/
But in 2001, the state, with the support of State Treasurer John Kennedy, sold 60 percent of its settlement income as a hedge against the possibility of bankruptcy by the tobacco companies. That money was placed in a trust fund that generates revenue for health care, education and the Taylor Opportunity Program for Students (TOPS), the program that provides college scholarships to Louisiana high school students to meet curriculum and grade criteria.
Now, though, Jindal is proposing selling off the remaining 40 percent, a move that Kennedy opposes, saying it represents the same disastrous fiscal policy that is responsible for the current $1.6 billion structural deficit in the state budget.
Commissioner of Administration Kristy Nichols, in her usual condescending manner, said Kennedy does not understand what the administration is trying to do.
“The only way we will consider this is if it creates recurring revenue for TOPS,” she said, adding that the money would not be spent all at one time.
But Nichols and Jindal only have a few months left in office and have no way of guaranteeing how the money will be used and Kennedy is more than a little skeptical of Jindal’s motives. “It’s just another gimmick to generate one-time money,” he said. “It’s just not a good idea to sell the family silver.”
He said the administration does not have the authority to dictate how the money is spent. “That will be the decision of the legislature and with the history of the legislature being what it is, you know they can’t wait to get their hands on this money,” he said.
Kennedy said the proposed sale is much like the manner in which the Office of Group Benefits (OGB) saw its reserve fund reduced from $500 million to only about $100 million and still dwindling.
“The administration reduced premiums for OGB members which on the surface, looked like a great thing for the members.” What the administration didn’t say is that the move also reduced the state’s corresponding obligation to match premiums, thus freeing up money the state would have paid into OGB for helping Jindal patch his budget holes. Meanwhile, because of reduction in income from premiums, OGB found itself paying out about $14 million more in benefits each month than it was taking in, thus creating a continuous drawdown on the reserve fund.
Kennedy said the revenue from the sale of the tobacco settlement cannot be used to plug budget holes because it would have to be used for TOPS and higher education. But by dedicating the money for TOPS, it would allow the administration to take the money it would normally use for those two purposes and redirect it to the state budget.
Kennedy said the administration has taken on all the characteristics of a junkie in search of a fix.
He said Jindal’s chronic use of one-time money to fill budget holes has included selling state property, raiding the Medicaid Trust Fund for the Elderly, indirectly taking funds from the OGB reserve fund. “When you get hooked badly enough, you will sell your shoes for a fix,” Kennedy said. “Any farmer knows it’s a bad idea to sell your seed corn because then you don’t have anything to plant next year’s crop.”
Noting that Moody’s and Standard & Poor’s bond rating agencies have already put Louisiana on negative credit watch, he said the rating agencies will take a dim view of the state’s selloff of the remainder of the tobacco settlement which is currently generating about $50 million a year for the state.
Nichols said the proposal to sell the remaining 40 percent of the settlement would have to be approved by the Tobacco Settlement Financing Corp. Board, the Legislature and the State Bond Commission. The board is scheduled to meet Tuesday at 10:30 a.m. in House Committee Room 1 in the State Capitol.
Approval by the board is expected to be a mere formality since the board members are Jindal appointees.
“My fear is that all $750 million of this money will be spent,” Kennedy said. “Everyone will want a piece of the pie. That will only add to our structural deficit and what will we do next once the money is gone? We’ve got to stop thinking about the next election and begin thinking about the next generation. Don’t hold this fire sale.”
If the board does approve it and it goes before the Legislature, “we are going to do everything we can to oppose the sale,” Kennedy said.
The practice of Bobby Jindal’s selling off everything in sight to raise money is reminiscent of a 2011 comment by former State Sen. Butch Gautreaux (D-Morgan City) who, in criticizing Jindal’s practice of selling state property, suggested acerbically that perhaps the administration should consider selling the 24-story State Capitol building because “it would make a great waterslide.” https://louisianavoice.com/2011/04/29/of-water-slides-and-comparisons-between-2-state-health-plans/
Louisiana Voice 
“…by dedicating the money for TOPS, it would allow the administration to take the money it would normally use for those two purposes and redirect it to the state budget.”
Okay Legislators, Mr. Aswell has told us what might well be your game plan. We will be watching what you do.
And one more matter Mr/Ms Legislator that we will be watching. Louisiana Crude closed at $50 bbl today. Jindal’s budget is using $70 bbl in its revenue projections. At $12 million per $1 change in the price of crude, Jindal’s initial budget DEFICIT is actually $240 million understated. It isn’t $1.6 Billion but closer to $1.850 Billion. Again, we are watching.
Absolutely, right!!!!
It is interesting to note that Mr. Kennedy is the only potential candidate for Governor who has a handle on the most critical issue facing the state – its financial survival and effective management – and he is not planning to run. We have to hope whoever is elected will listen to him rather than treat him as a bothersome gnat as this administration seems to do.
Say what you will, there is NOTHING more important in this state than the budget and it is being trivialized by this administration and a majority of the legislature. Before you go into the voting booth to re-elect your state representative and senator ask them what they have done to try to address the ineffective and ultimately wasteful ways our state manages its finances. Ask your chosen candidate for Governor what, specifically, he plans to do about the horrible mess with which he will no doubt be left.
It’s interesting that you use the image of a druggie doing anything for his next fix. This episode reminds me of the scene in “Clean and Sober” when junkie Michael Keaton calls his parents and asks them to mortgage their house to give him the money he needs to pay his debts and keep getting high.
Kennedy was actually the one who compared the admin to a “junkie selling his smartphone or TV to buy another fix.” http://www.treasury.state.la.us/Lists/SiteArticlesByCat/DispForm_Single.aspx?List=c023d63e-ac65-439d-af97-da71d8688dff&ID=875
Oh I sincerely hope that someone in the lege will put a stop to this little t*rd’s actions on the settlement money.
I almost spit out my iced tea when I read this on the WWL website. Imagine! He’s *confident* he’s leaving the state better than he found it!
http://www.wwltv.com/story/news/politics/2015/03/13/bobby-jindal/70286542/
The only way this little pissant will leave the state better is when he leaves…for good.
@Fredster, agree with your last sentence 100%
What a contrast in character and competence, Kennedy and Jindal. Who would you trust your family’s checkbook with? I rest my case.
Next week the professional educators in Louisiana’s public schools will do all they can to administer a test developed to destroy our educators and public schools. They are being held to asinine procedures developed as if they are mindless, stupid uneducated machines! They will not give up or abandon their students and will soldier through, following the rules designed to fail schools, students and themselves. They will do so perfectly, not giving White the chance to use this test against them. Our legislators need to stand up straight, get a spine and care about our citizens as much as our public school educators do!!
I respectfully disagree with what appears to be your position on Common Core. What is your solution to the fact students in Louisiana, as well as the rest of the USA, are losing ground to the rest of the world educationally and that it is not even possible to fairly judge the differences in the quality of education among the individual states? If your answer is to develop our own standards, what good will that do? If you look at our history, you will see that has ALWAYS failed. What has happened to make anybody optimistic it can work in the future? As I have said before, I will, for free, develop standards that will make our educational system look like the best in the world, but, like the current success of our state’s leadership, it will be an illusion, at best. Sorry for any typos. I’m angry, too!!!
I agree with you totally, Stephen, and it’s frustrating when our governor, a previous CC cheerleader who essentially used the 2011 campaign year to line up BESE with his preferred candidates to implement it and other educational reforms, now spends ungodly taxpayer dollars fighting its implementation (including suing the Federal government with its infinite resources). I guess at least Faircloth and crew benefitted handsomely for our governor’s lack of conviction!
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Lost Yankee is right, Robert & Stephen. LA public schools were doing much better without Common Core. Look at how last year’s ACT scores sank after our first full year of implementation of CCSS. Smoke & mirrors. Different is not better! The only reason that LA test scores compare so unfavorably to the 49 other states is that LA is the private school capital of the US. Take out all of those affluent, parent-supported, high-achieving kids that go to Jesuit, Country Day, Dominican, etc. & of course you will not compare favorably with the scores for public school students in CT where EVERYONE goes to public school!
Having affluent parents does not make you high achieving. That’s just a matter of separating the rich slackers from the poor ones. There are many high achieving students in public schools and there are programs that cater to them. Many parents assume since they’re paying big bucks they getting a quality education for the kids. Rich or poor it still requires parenting, not separation from the world around you.
Not only should the remaining “projected” settlement payments not be sold, but the state should pay off the 60% sold earlier than projected. The logic behind this statement is based on the fact that payments from the MTSA, Master Tobacco Settlement Agreement, of 1998 are “projections” and are not fixed payments. Example, projected MTSA payments to Louisiana for years 2008-17 were $162 million dollars. The actual receipts from the MTSA in 2014 were $141 million or $20 million less than projections. One explanation for this reduction is found in the fact that 1998 MTSA payment agreement takes into consideration the percentage of smokers in the respective state. The payment made per the agreement parallels the percentage of smokers within each respective state. As the percentage of smokers decrease, so does the MTSA payment. The required bond payments, however, are fixed. This results in a situation were more “settlement” money is required for payment of the bonds producing less money for distribution to Louisiana.
My vote, for what it’s worth, is increasing the excise taxes on cigarettes(and I’m a smoker) from $0.36 a pack to a $1.00 a pack, provided the increase, $.64 cents per pack, were dedicated to and only to the early retirement of the 60% of bonds are already sold. Early retirement of the bonds would help in a number of ways: first, Louisiana would realize more of the actual settlement payments from the 1998 MTSA. Second, more of the settlement payments would go into Millennium Fund and the Louisiana Fund. Third, Louisiana would decrease a portion outstanding debt which would possibly improve the state’s bond rating.